Fitch Sees Little Movement In Transportation

DALLAS – Transportation sectors are in the doldrums in 2013 and likely will remain so, with little increase in volume expected through the end of the year, Fitch Ratings said in a trend report issued Thursday.

Growth that was tepid in the first six months of the year is expected to remain lukewarm, with some airports, ports, and toll roads reporting increases, and others posting volume declines.

“The economy is really not performing to the level where it would help transportation,” said Seth Lehman, a Fitch analyst based in New York. “We’re seeing growth, but it is at a slow pace.”

Volume improvements will be flat to modest, Fitch said, and performance remains sensitive to downside risks as the domestic and global economies slowly improve.

The slowness in the sector should not affect credit ratings of issuers, Lehman said.

“We base our ratings on conservative growth assumptions,” he said. “The rating outlooks likely will remain stable.”

Most transportation operations are likely to under-perform, based on their expectations for 2013 volumes, Lehman said.

“But there are out-performers too,” he said. “Some credits will do better than had been expected, but most others should be slower.”

Total passenger enplanements have grown modestly this year, but the pace won’t match the 1.4%  increase posted in 2012. Traffic growth in the first six months of 2013 was up 1% from the same period last year.

Enplanements are nearing the peak levels set in 2007.

More than half of airports rated by Fitch showed traffic increases, with strongest performances from La Guardia, Reagan-National and Chicago-Midway. Weak performers include airports in Memphis and Colorado Springs.

Major market airports with international flights are expected to increase their enplanements, with small airports and secondary hubs lagging.

The end result of the stalled merger of US Airways and American Airlines is not likely to affect hub airports through 2013, Fitch said.

Toll roads posted a 4.6% revenue growth in the first six months of 2013 as tolls rose, while a decline was seen in vehicle miles traveled.

“Expressways are seeing volume increases and doing well,” Lehman said. “Volumes are not so good for stand-alone turnpikes and toll bridges.”

Even so, he said, expressway growth is tapering off.

Higher traffic counts were seen in the Southwest, Midwest and West, Fitch said. A decline of 1.7% in the Northeast was attributed in part to the aftermath of Hurricane Sandy and the failure to pass a $50 billion federal aid bill for the region until January.

Ports posted mixed results in the first half of 2013, with half showing declines and other modest gains. Overall volumes were down 1.2%.

Capital improvements at U.S. ports are dominated by capacity enhancements needed to accommodate the large ships that will be used when the expansion of the Panama Canal is completed in 2015.

Fitch said it is keeping a close watch on how port volumes may be shifted by the increasing collaboration among major international shipping lines, including the P3 alliance of Maersk, MSC, and CMA-CGM that becomes effective in 2014.

Port performances should improve over the remainder of 2013, as retailers stock up for the winter holiday season, Fitch said.

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